Plus equals good business for firms as recession takes its toll on AIM

When Hammonds sent out flyers recently offering to help companies delist from AIM for a bargain £5,000, it seemed like another nail was being hammered into the coffin of the junior market.

Activity on AIM has fallen ­catastrophically as a result of the economic crisis – so much so that some commentators have ­predicted that it will not survive the ­recession.

But amid all the doom and gloom, there are those who will have watched the decline of the FTSE’s younger brother with no little satisfaction. The Plus ­market, an alternative trading platform for small- to mid-sized companies, has enjoyed something of a ­resurgence while its larger rival has stalled.

And, in doing so, it has provided a welcome boost to mid-market firms trying to fill an AIM-sized hole in their corporate revenues.

“We’re acting for young entrepreneurial companies. They still have deals and they still have cash,” says Gary Withey, head of corporate finance at Collyer Bristow.

Plus and AIM have always had a combative relationship (see box, right). Plus was very nearly edged out by its rival before rebranding and relaunching in 2004 (it had previously been known as Ofex).

While both platforms are relatively light on regulation and a cheaper source of share capital than the main list, Plus enjoys a number of competitive advantages.

“Coming onto AIM is going to cost you roughly £350,000. To get on to Plus as a cash shell we can do it for between £70,000 and £100,000,” reveals Withey.

And the regulatory and accounting obligations are even more ­flexible. So flexible, in fact, that one corporate partner likened Plus to the Wild West because it attracts a range of investors from across the globe who might have been frightened off by stricter rules.

Plus is using these advantages to lure AIM companies into the fold. A Plus spokesman told The Lawyer that while the number of companies delisting and making the transition is small, there is a clear trend developing. “Plus is seen as a better market for UK small cap than AIM,” he says.

Foot Anstey is one of a small group of firms to have grasped the opportunity. It advised Bright Futures, one of the first companies to delist from AIM and admit to Plus, in November last year. Corporate partner James Evans led the team. Other Plus specialists include Collyer Bristow, Beachcroft, Howard Kennedy and boutique firm Marriott Harrison.

The Bright Futures deal typifies the complexity now associated with Plus work, despite the ­market’s cheap and cheerful ­reputation. It took a year to ­complete the reverse takeover of Plus-listed Restaurants At Work, a debt-for-equity swap and new share issue on Plus.

The largest company ever to join Plus entered the market in February 2009. Kuwaiti property company Rak Real Estate is expected to have a market capitalisation of more than $900m (£612.33m), dwarfing the next biggest company – Arsenal Holdings – which has a market cap of £470m. It was an indicator not only of the health of the market, but also the growing status of Plus.

McClure Naismith London commercial partner Kit Stenning advised the owner, Rafed Al Khorafi, on the transaction. The parent company Rafco reversed into cash shell Rak Real Estate, allowing assets from the parent company to be transferred into the venture.

“The complicated thing was marrying the English law concepts with Kuwaiti law concepts, which are often very different,” according to Stenning. “We’re looking at ­several more deals that might be more substantial than the very small transactions ­typically seen on Plus.”

Withey says the number of Plus listings Collyer Bristow has worked on has remained fairly steady this year, despite the fall in general ­corporate activity. The key to winning new instructions is getting to know the corporate advisers, Plus’s equivalent to the nominated ­advisers (nomads) on AIM, say lawyers working in the sector.

Stenning was introduced to the Al Khorafi family by City & Westminster Corporate Finance, which he had worked with a number of times at his previous firm DMH Stallard. And Edwin Coe has ­clearly benefited from a close ­relationship with Plus specialist Axiom Capital (see box, above), winning two of the most recent listings on the market, those of commodities companies Caspian Minerals and Africa Oil.

For firms operating in the small cap market, the relative health of the Plus market is, at least, a ­counterbalance to the lack of AIM activity. For the firms winning a place at the table on deals of the size and complexity of Rak Real Estate, it could be even more. Magic circle lawyers take note: bigger is not always better.

“Like any product, people want to buy it,” says Stenning of the Plus market. “And at the moment, it’s working.”

A question of antitrust: PLUS Vs LSE

Plus is soon to be ­facing off rival trading platform AIM at the High Court in a major antitrust case.

Plus is challenging the London Stock Exchange (LSE) over a rule that it says effectively prevents AIM securities being traded on any other market.

Clifford Chance litigation partner Luke Tolaini is acting for Plus, with Nicholas Green QC of Brick Court Chambers representing the market in court.

The LSE has instructed Freshfields Bruckhaus Deringer litigation partner Jon Lawrence alongside Peter Roth QC of Monckton Chambers.

The case will have significant implications for both markets. Under current rules, trades carried out on venues other than the LSE have to be reported to the LSE. Of the 1,600 or so AIM securities traded on the LSE, only 90 have elected to be dual-traded on Plus.

Plus is planning to launch a new market, Plus-Europe, on which it hopes to trade all AIM securities from launch.

Plus market general counsel Jamie Whitehorn says: “We believe investors should be able to benefit from a competitive trading environment in AIM stocks in exactly the same way they’re now benefiting from competition in the listed securities markets.”

The case begins on 15 June and is due to last for around four weeks.

New listings on PLUS (market capitalisation in brackets)

February 2009: Caspian ­Minerals (£750,000). Legal adviser: Edwin Coe; corporate adviser Axiom Capital
January 2009: Africa Oil (£1.3m). Legal adviser: Collyer Bristow; corporate adviser: Lion Capital
December 2008: Alexander Group (£5.4m). Legal adviser: Edwin Coe; corporate adviser: Axiom Capital
November 2008: Prize Mobile (£2.7m). Legal adviser: McFaddens; corporate adviser: First London Securities
October 2008: Bright Futures (£3.2m). Legal adviser: Foot Anstey; corporate adviser: Dowgate Capital Stockbrokers (AIM delisting)
June 2008: Silver Mines (£3.4m). Legal adviser: ­Cobbetts; corporate adviser: Loeb Aron & Co